GOODS AND

SERVICES TAX
UNIT I
 SYLLABUS
Unit I: Introduction to Goods and Services Tax
Introduction – Direct tax and Indirect tax – Meaning, Stages of Evolution of Goods
and Services Tax, Subsumed of taxes, constitutional background, Structure of GST –
CGST, SGST,UTGST & IGST, Benefits of implementing GST, GSTN – Structure,
features and functions, GST council and its Structure
Unit II: Levy and Collection of Tax and Time and Place of supply
Levy and Collection of Tax, Rates of GST, Scope of Supply: Composite and Mixed
Supplies and E-commerce under GST regime, Reverse Charge Mechanism and
composition scheme, Taxable event: Place of supply, Time of Supply, Valuation of
Place and Time of supply, Valuation rules
 SYLLABUS
Unit III: Registration and payment of Tax
Registration – Persons Liable for Registration, Compulsory Registration, Deemed
Registration, Procedure For Registration, GSTIN and its structure, Amendment of
Registration – Cancellation of Registration, Revocation of cancellation, Returns –
Furnishing Details of Supplies
Unit IV: Assessment and Audit
Assessment – Meaning, Types of Assessment – Self Assessment – Provisional
Assessment Scrutiny Assessment, Types of Assessment – Summary Assessment –
Best Judgment Assessment – Assessment of Non Filers – Assessment of
Unregistered Persons, Audit, Power of Authorities
 SYLLABUS
Unit V: Appeals
Appellate Authorities – Powers, Procedure for appeal, Appeals before Tribunal,
Appeals by the Department (CGST/SGST) before the AA/Tribunal, Revision by
Commissioner (CGST/SGST), Steps of Appeals under GST

TEXT BOOKS
 Indirect Taxes GST and Customs Law by Dr. R.Parameshwaran and P.
Visvanathan
 How to meet your obligations by Gupta S.S

 GST by Halakandhi.S
 TAXATION
Tax
A tax is a compulsory payment levied on the persons or companies to meet the expenditure incurred
on conferring common benefits upon the people of a country.
Two aspects of taxes follow from this definition:
(1) A tax is a compulsory payment and no one can refuse to-pay it.
(2) Proceeds from taxes are used for common benefits or general purposes of the State. In other words,
there is no direct quid pro quo involved in the payment of a tax.
Definition of Tax:
In every country major part of the revenue is raised through taxation.
Prof. Taylor
According to Prof. Taylor “Taxes are compulsory payments to gov­ernments without
expectations of direct return or benefit to the tax payer”.
 TAXATION
Prof. Bastable

Prof. Bastable “defined a tax is a compulsory contribution of the wealth of a person for the service of public power”.
According to Taussing “the essence of a tax as distinguished from other charges by government is the absence of a direct
‘quid-pro-quo’ between the tax payer and the public authority”.

Dr. Dalton

Dr. Dalton opines that “a tax is a compulsory contribution imposed by the public authority irrespec­tive of the exact
amount of service to the tax payer in return and not imposed as a penalty for any legal offence”.

Prof. Adams

Prof. Adams gave a Comprehensive definition of a tax stressing the various aspects of tax. He say “from the standpoint of
view of the state, a tax is a source of derivative revenue, from the angle of the citizen a tax is a coerced payment, from the
administrative point of view it is a de­mand for money by state in conformity to established rules from the point of view of
theory a tax is a contribution from individuals for common expenditure.
 TAXATION
Objectives of Taxation:

The primary purpose of taxation is to raise revenue to meet huge public expenditure. Most governmental
activities must be financed by taxation. But it is not the only goal. In other words, taxation policy has some non-revenue
objectives. It is used as an instrument of economic policy. It affects the total volume of production, consumption,
investment, choice of industrial location and techniques, balance of payments, distribution of income, etc.

1. Economic Development

2. Full Employment

3. Price Stability

4. Control of Cyclical Fluctuations

5. Reduction of BOP Difficulties

6. Non-Revenue Objective
 TAXATION
BASIC CHARACTERISTICS OF A TAX:

 It is a compulsory contribution. Even though a tax is paid will­ingly, in a sense it is a compulsory.

contribution. It only means that no one can refuse to pay a tax.

 The fact that tax is a contribution implies the notion of a sacri­fice involved on the part of the contributor.

 Tax payment is a personal obligation.

 A tax is levied according to certain legal requirements.

 The amount of tax is not fixed with reference to the exact benefit which a taxpayer receives from public
service.

 A tax is paid out of the income of the taxpayer.

 The power of taxation is mainly to be used for collecting revenue to the state.
 TAXATION
PRINCIPLES OR CANONS OF TAXATION:

The principles of taxation can be selected only in terms of the goals which are accepted as the appropriate
objectives of the economic system. Adam Smith was probably the first writer to attempt a general statement of the
principles or canons which should govern any sound system of taxa­tion.

1. Canon of equality or Ability:

According to this canon, taxes imposed should be in accordance with an individual’s ability to pay.

2. Canon of Certainty:

This canon is meant to protect tax payers from unnecessary harassment by the tax officials. The amount to be
paid, the time and method of payment should be clear and certain for the tax payers to adjust his income and expenditure
accordingly.

3. Canon of Convenience:

This canon states that every tax ought to be levied at the time or on the manner in which it is most likely to be convenient
 TAXATION
for the con­tributor to pay it.

4. Canon of Economy:

Every tax involves a collection cost. It is important that the cost of collection should be the minimum possible.

Other Canons:

The above canons of taxation are still considered as fundamental principles of taxation. However, owing to the
needs of the modern complex state and the problem involved in them, the canons of Adam Smith needs to be
supplemented, by certain rules, most of which should be treated as corollaries to the canons of taxation.

5. Canon of Productivity:

Productivity or physical adequacy means that, the tax system should sufficiently yield the revenue needed to
meet the requirements of the state.
 TAXATION
6. Canon of Elasticity:

Elasticity is closely connected with fiscal adequacy. This canon implies that yield from taxation should grow
along with increase in population and development of economy.

7. Simplicity:

The tax system should be simple, plain and intelligible to the com­mon man. As far as the underdeveloped
countries are concerned, this is a very important characteristic of good tax system; since the common taxpayers are
illiterate.

8. Flexibility:

Flexibility means that there should be no rigidity in the tax system, so that it can be quickly adjusted to new
conditions.

9. Diversity:

There should be a variety of taxes properly co-ordinated, so as to form a united and consistent system.
 TAXATION
10. Neutrality:

The tax system should not distort the working of the market mecha­nism. Taxes should not produce any adverse
effect in the economy.

11. Canon of Co-Ordination:

In a federal system of government, taxes are imposed by the cen­tral, state and local governments.

12. Canon of Expediency:

This canon insists that taxes should not be covered in controversy. Taxpayers should have no doubt about its
desirability.

-
 TAXATION
Impact, Incidence and Shifting of taxes

Impact

The person who pays taxes to the government for first instance bears impact. It is
simply imposition of tax.

Ex: manufacturers pays taxes to the government.

Shifting

The process of transferring the tax burden to another person is known as shifting.

Ex: Wholesaler collects taxes from retailer

 TAXATION
Incidence

It is the final stage of tax shifting as well as final location of tax burden.

Ex: Retailer collects taxes from Consumer

But in case of direct taxes, the shifting is impossible. So the person on whom the
taxes imposed, have to pay the taxes. So under direct taxes, incidence and impact will be on
same person.

`M ------ W------R-------C

100-----120-----150

Tax@10% ---------10------12------15
 TAXATION
CLASSIFICATION OF TAXES
Based on tax incidence and payment
Direct Taxes
Indirect taxes
Based on rates of taxes
Proportional
Progressive
Regressive
Based on indirect tax levy
Specific duty
Ad-valorem
 DIRECT TAX
Direct Tax
It is a tax levied directly on a taxpayer who pays it to the Government and cannot
pass it on to someone else.
Direct taxes imposed in India
Some of the important direct taxes imposed in India are mentioned below:
Income Tax- It is imposed on an individual who falls under the different tax brackets
based on their earning or revenue and they have to file an income tax return every year
after which they will either need to pay the tax or be eligible for a tax refund.
Estate Tax– Also known as Inheritance tax, it is raised on an estate or the total value of
money and property that an individual has left behind after their death.
Wealth Tax– Wealth tax is imposed on the value of the property that a person possesses.
However, both Estate and Wealth taxes are now abolished.
 DIRECT TAX
Merits of direct taxes

• Ensures the principle of Ability to pay

• Reduces the social and economic inequality

• Certainty

• Elasticity

• Economy

• Educative effects

• Control the effect of trade cycle

 TAXATION
Demerits of direct taxes

• Arbitrary in nature

• Difficulty in formation of progressive tax rates

• Inconvenience

• Possibility of tax evasion

• Limited scope

• Disincentive to work, save and invest

• Expenditure to collect
 TAXATION
Indirect Tax

It is a tax levied by the Government on transfer of goods and services and not on
the income, profit or revenue of an individual and it can be shifted from one taxpayer to
another. The final consumer will bear tax burden.

Earlier, an indirect tax meant paying more than the actual price of a product bought
or a service acquired. And there was a myriad of indirect taxes imposed on taxpayers.

Let’s discuss a few indirect taxes that were earlier imposed in India:

Customs Duty- It is an Import duty levied on goods coming from outside the
country, ultimately paid for by consumers and retailers in India.
 TAXATION
Central Excise Duty– This tax was payable by the manufacturers who would
then shift the tax burden to retailers and wholesalers.

Service Tax– It was imposed on the gross or aggregate amount charged by the
service provider on the recipient.

Sales Tax– This tax was paid by the retailer, who would then shifts the tax burden
to customers by charging sales tax on goods and service.

Value Added Tax (VAT)– It was collected on the value of goods or services that
were added at each stage of their manufacture or distribution and then finally passed on to
the customer.
 TAXATION
GST as Indirect Tax
The various taxes that were mandatory earlier are now obsolete, thanks to this new
reformed indirect tax. Not just that, GST is making sure the slogan “One Nation, One Tax,
One Market” becomes the reality of our country and not just a dream.
That said, with the dawning of the Goods & Services Tax (GST), the biggest relief
so far is clearly the elimination of the ‘cascading effect of tax’ or the ‘tax on tax’
quandary.
Cascading effect of tax is a situation wherein the end-consumer of any goods or
service has to bear the burden of the tax to be paid on the previously calculated tax and as a
result would suffer an increased or inflated price.
 TAXATION
Features of indirect taxes

 Imposed on goods and  Regressive nature

services  Inflationary
 Levied on consumers  Individual can avoid taxes
 All pervasive nature  Distort the market
 Taxable event  Convenience
 Shiftablity  Elastic in nature
 TAXATION
Merits of indirect taxes • Ensures the principle of

• Convenient equality

• Wide scope • Effective allocation of

resources
• Flexibility
• Discourages the consumption
• Tax evasion can be controlled
of articles affecting health
• Substantial nature
 TAXATION
Demerits of indirect taxes

• Ability to pay principle • High cost of collection

violated • Lack of civic consciousness
• Regressive • Inflationary
• Uncertainty

• Discourages savings
 TAXATION
Difference between Direct and Indirect taxes
Shiftablity of tax burden

Principle of Ability to pay

Measurement of taxable capacity

Principle of certainty

Convenience
 TAXATION
Difference between Direct and Indirect taxes
Civic consciousness

Nature of taxation

Removal of disparity in income and wealth

Focus on growth
 TAXATION
Specific duty

A specific tax on a commodity is a tax per unit of the commodity,

whatever its price. Thus the amount of total specific tax will vary in
accordance with the changes in total output or sales of the commodity and not
with the total value of output or sales.

Ad-valorem duty

An ad-valorem type of an indirect tax is levied according to the value

of the commodity. For instance, sales tax in India is an ad-valorem tax.
 TAXATION
Proportional tax

In case of proportional tax it is the rate which is fixed and not the
absolute amount of the tax. Thus with the rate of 25 per cent proportional
income tax, a person with income of Rs. 25,000 will pay Rs. 6,250 as the tax,
and a person with income of 50,000 will pay Rs. 12,500 as the tax.

Progressive tax

In case of a progressive tax, rate of the tax increases as the amount of

the tax base (income, wealth or any other object) increases.
 TAXATION
In India income tax, an important direct tax levied by the Central Government,
is progressive. Under progressive income tax, the richer person pays not only
absolutely more tax but also a higher rate of the tax.

Regressive tax

In case of a regressive tax, the rate is lowered as the income rises.

Thus, under regressive tax system, the burden of the tax is relatively more on
the poor than on the rich. A regressive tax is therefore inequitable and no
civilised Government in the world today will levy such a tax.
BEFORE GST- TAX SYSTEM
 TAXATION
CONSTITUTIONAL BASIS

The Seventh Schedule to Article 246 contains three lists, which contain
the matters under which the Union and the State Governments have the
authority to make laws.

List – I: Union List

It contains the matters with respect to which the Parliament (Central

Government) have the exclusive right to make laws.
 TAXATION
CONSTITUTIONAL BASIS

List – II: State List

It contains the matters in respect of which the state government has the
exclusive right to make laws.

List – III: Concurrent List

It contains the mattes in respect of which both the Central and State
Governments have the power to make laws.
TAX STRUCTURE
GST IN INDIA
 GST- 122th AMENDMENT
KEY FEATURES

 Introduction of GST in concurrent power

 Subsuming various taxes of state and central government

 Concept of declared goods

 Coverage of goods and services

 Compensation for state governments

 Creation of GST Council

 GST- 101st AMENDMENT
Key Features
• The delineation of powers to levy and make laws with respect to GST
• The applicability and scope of the GST law
• The manner of apportionment of revenue from GST among Centre and
States
• The constitution, powers and duties of the GST Council
• The discontinuation of existing taxes to give way for GST
• The manner of providing compensation to States for loss of revenue on
account of the introduction of GST
GST- AMENDMENT
PRESENT TAX SYSTEM
 BENEFITS OF GST

Benefits
• Benefit to all businessmen and people
• Quick decisions
• Supporting government decisions
• Enhance industrial growth
• Boosting exports
 BENEFITS OF GST
• Wide tax base
• Transparency
• Reduced compliance
• Additional revenue to poor states
• Disincentive for tax evasion
• Ease of registration
 SPECIAL FEATURES OF GST
Special features of GST levied in India
1. Concept of Supply

2. Destination Based Consumption Taxation

3. Dual GST

4. Integrated GST

5. Scope of GST

6. Exemption Threshold

7. Composition levy

8. Input Tax Credit

 SPECIAL FEATURES OF GST
9. Zero-rated Supply

10. HSN (Harmonized System of Nomenclature) Code

11. SAC-(Service Accounting Code)

12. Settlement of Accounts

13. Electronic Filing

14. Modes of Payment of Tax

15. TDS and TCS Mechanisms

16. Self-assessment

17. Anti-profiteering
 TAXES SUBSUMED UNDER GST
Central Taxes subsumed within the GST:

(a). Central Excise Duty

(b). Duties of Excise (Medicinal and Toilet Preparations)

(C). Additional Duties of Excise (Goods of Special Importance)

(d). Additional Duties of Excise (Textiles and Textile Products)

(e). Additional Duties of Customs (commonly known as CVD)

(f). Special Additional Duty of Customs (SAD)

(g). Service Tax

(h). Central Surcharges and Cesses relating to goods and services.

State Taxes subsumed within the GST:

(a). State VAT

(b). Central Sales Tax(though it is given in Union-List of the

Constitution. Before GST, it was collected and appropriated by the
state governments)

(c). Luxury Tax

(d). Entry Tax (all forms)

(e). Entertainment and Amusement Tax (except when levied by the

local bodies)

(f) Taxes on advertisements

 TAXES SUBSUMED UNDER GST
(g). Purchase Tax

(h). Taxes on lotteries, betting and gambling

(i). State Surcharges and Cesses so far as they relate to supply of

goods and services

Note: The list of exempted goods and services would be common for
the Centre and the States,
 TAXES NOT SUBSUMED UNDER GST
Taxes not Subsumed under GST:

GST may not subsume the following taxes within its ambit:

(a). Basic Customs Duty on imports

(b). Exports Duty

(c). Road & Passenger Tax

(d). Toll Tax

(e). Property Tax

(f). Stamp Duty

(g). Electricity Duty
 TYPES OF GST
Types of GST/ Stucture

There are four different types of GST as listed below:

• The Central Goods and Services Tax (CGST)

• The State Goods and Services Tax (SGST)

• The Union Territory Goods and Services Tax (UTGST)

• The Integrated Goods and Services Tax (IGST)

 TYPES OF GST
1. The State Goods and Services Tax (SGST)

SGST is defined as one of the two taxes imposed on transactions of goods and
services of every state.

Levied by State Government of every state, SGST replaces every kind of existing
state tax that include Sales Tax, Entertainment Tax, VAT, Entry Tax, etc.

Under SGST, the State Government can claim the earned revenue.
 TYPES OF GST
2. The Central Goods and Services Tax (CGST)

CGST is referred as the Central Tax levied on transactions of goods and services
which take place within a state.

Imposed by the Central Government, CGST ensures to replace all other Central
taxes inclusive of State Tax, CST, SAD, etc.

Prices of goods and services under CGST are charged in accordance with the basic
market price.
 TYPES OF GST
3. The Integrated Goods and Services Tax (IGST)

IGST is applied on the inter-state transactions of goods and services.

IGST is also applicable on the goods being that are imported to distribute among
the respective states.

The IGST is levied when the movement of products and services occur from one
state to another.
 TYPES OF GST
4. The Union Territory Goods and Services Tax (UTGST)

Applicable on the Intra UT supply of goods and services, the aim to impose
UTGST is to apply a collection of tax to provide benefits as same as SGST.

The UTGST is applicable to five Union Territories namely Lakshadweep, Damn and
Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands, and Chandigarh.
 GST NETWORK
Goods and Services Tax Network:

Goods and Services Tax Network (GSTN) is a not-for-profit, non-government

company promoted jointly by the Central and State Governments, which will provide
shared IT infrastructure and services to both central and state governments including tax
payers and other stakeholders.

The Frontend services of Registration, Returns, Payments, etc, to all taxpayers

will be provided by GSTN. It will be the interface between the government and the
taxpayers.
 GST NETWORK
Goods and Services Tax Network (GSTN) has been set up by the
Government as a private company under erstwhile Section 25 of the
Companies Act, 1956, OSTN would provide three free end services to the
taxpayers namely registration, payment and return.

Besides providing these services to the taxpayers, GSTN would be

developing back-end IT modules for 27 States who have opted the same. The
migration of existing taxpayers has already started from November, 2016.
 GST NETWORK
The Revenue department of both Centre and States are pursuing the
presently registered taxpayers complete the necessary formalities on the IT
system operated by GSTN for successful migration.

GSTN has selected more than 34 IT, ITES and financial technology
companies, to be call GST Suvidha Providers (GSPS). GSPS would develop
applications to be used by taxpayers for interacting with the GST.
 GST NETWORK
Services Rendered by GSTN:

GSTN rendering the following services through the Common GST Portal:

(a) Registration (including existing taxpayer migration)

(b) Payment management including payment Gateways and integration with banking
systems

(c) Return filing and processing

(d) Taxpayer management, including account management, notifications, information,

and stats tracking

(e) Tax authority account and ledger Management

(f) Computation of settlement (including IGST Settlement) between the Centre and
States, Cleaning house for IGST

(g) Processing and reconciliation of GST on import and integration with EDI systems of
Custom

(h) MIS including need based information and business intelligence

(i) Maintenance of interfaces between the Common GST Portal and tax administration
systems

(j) Provide training to stakeholders

(k) Provide Analytics and Business Intelligence to tax authorities

(l) Carry out research and study best practices.

 GST NETWORK
In GST regime, while taxpayer facing core services of applying for registration,
uploading of invoices, filing of return, making tax payments shall be hosted by GST
System, all the statutory function (such as approval of registration, assessment of return,
conducting investigation and audit etc.) should be conducted by the tax authorities of States
and Central governments.

Thus, the frontend (GST Portal services) shall be provided by GSTN and the backend
modules shall be developed by states and Central Government themselves.
 GST COUNCIL
GST Council

As per Article 279A, GST Council was constituted by the president of India. The GST
Council comprising the Union Finance Minister, the Minister of State (Revenue) and
the State Finance Ministers to recommend on the GST rate, exemption and thresholds,
taxes to be subsumed and other features.

This mechanism would ensure some degree of harmonization on different aspects of

GST between the Centre and the States as well as across States.
 GST COUNCIL
Composition of GST Council:

GST Council is a federal forum with members of both centre and states in India. The
composition of the Council is as follows:

(a) The Union Finance Minister (Chairman)

(b) The Union Minister of State in charge of Revenue or Finance (Member)

(c) The Minister in charge of Finance or Taxation or any other Minister, nominated
by each State Government (Members).

Anyone of them will be Vice Chairman of the GST Council who mutually elected by them.
 GST COUNCIL
Functions of GST Council:

The Goods and Services Tax Council shall make recommendations to the Union
and the States on

(a) The taxes, cesses and surcharges levied by the Union, the States and the local
bodies which may be subsumed in the goods and services tax.

(b) The goods and services that may be subjected to, or exempted from the
goods and services tax.

(c) The threshold limit of turnover below which goods and services may be
exempted from goods and services tax.
 GST COUNCIL
(d) The rates of GST.

(e) Any special rate or rates for a specified period, to raise additional resources
during any natural calamity or disaster.

(i) Special provision with respect to the States of Arunachal Pradesh, Assam,
Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim,
Tripura, Himachal Pradesh and Uttarakhand

(g) Any other matter relating to the goods and services tax, as the Council may
decide.
 GST COUNCIL
Decisions making

Every decision of the Goods and Services Tax Council shall be taken at a meeting.
One half of the total number of members of GSTC would form quorum in meetings of
GSTC.

Decision in GSTC would be taken by a majority of not less than three-fourth of

weighted votes cast. Centre and mini mum of 20 States would be required for majority
because Centre would have one-third weightage of the total votes cast and all the States
taken together would have two-third of weightage of the total votes cast.